Inflation Fears Rocking Wall Street - Proactive Action for Retirement and Long-Term Health Care Planning Needed Now

According to U.S. Labor Department data, the annual inflation rate for the United States is 3.2% for the 12 months ended July 2023 up from 3.0% in June. Despite the drop, inflation remain a major concern. You can see the latest here - Cost of Living Statistics - Credit Summit (mycreditsummit.com).

Many Americans are apprehensive about their retirement plans due to inflation and related economic worries. There is no doubt that economic anxiety affects a large number of people, especially those over 40, even if some economists argue that the fear of inflation alone is equally as frightening as inflation itself.

In general, retirement planning should take into account the consequences of future inflation, market declines, and general economic uncertainty. Recent inflation, notably soaring energy prices, has sparked economic anxiety and recessionary worry as evidenced by the fact that 41% of small business owners identify inflation as their primary concern, it's becoming increasingly crucial for individuals and businesses alike to incorporate strategies for coping with these economic challenges into their financial planning and decision-making processes.

Most people today include the cost of long-term health care in their retirement planning. Long-term health care services can be expensive and not covered by health insurance. The need for long-term health care increases as we get older as a result of longevity, health decline, mobility issues, and even dementia.

Costs for Everything Going Way Up

The future cost of long-term health care was rising before the rapid inflation and market decline. Now, what was already expensive will be even more costly in the decades ahead.

According to the Schroders 2022 U.S. Retirement Survey, working Americans say it will take $1,100,000 in savings to retire comfortably. However, 56% say they expect to have less than $500,000 saved, including 36% forecasting less than $250,000 in savings. Only about one-quarter (24%) expect to reach the $1,000,000 mark in retirement savings. 

These are seriously challenging times, and they seem to be taking a toll on the American worker and their belief about achieving a comfortable retirement. This year, inflation is the number one concern Americans have about their retirement, and next year, it may be something else. Challenges will come, but they can't derail our focus on saving and preparing for our retirement.

Joel Schiffman, Head of Intermediary Distribution, North America, Schroders. 

Uncertainty Creates Paralysis

Inflation and economic uncertainty may result in fewer people planning for their retirement as they face higher costs for daily living. A recent survey commissioned by D.A. Davidson & Co revealed that most respondents (68%) indicated that inflation has significantly or at least moderately impacted their ability to afford basic expenses.

Many people may delay or ignore planning despite the need to be proactive during a time of uncertainty. With many Americans expressing concern about the costs of groceries, rent/mortgage, car payments, and gas since January 2021, so many ignore how to adjust their retirement plan to consider these changes. However, for those over 40, considering inflation and economic uncertainty are reasons why you should take proactive action now, especially for future long-term health care. 

When markets may not be performing, and our savings and investments are down, Long-Term Care Insurance is a guarantee that we'll have the money to access quality care options without financial strain. Unlike our investments, Long-Term Care Insurance is a guaranteed financial product and is not subject to the ups and downs of financial markets.

Michele Perloe 

Perloe, an Atlanta-based Long-Term Care Insurance specialist, says the guaranteed tax-free benefits from an LTC Insurance policy can help you access quality care options despite the rising long-term health care costs.

Having some coverage is better than having no coverage. Whatever money your policy pays for your future care is money you do not have to spend out of your own assets.

Long-Term Health Care Costs Rising Sharply

The LTC NEWS Cost of Care Calculator already shows how expensive long-term health care is today, but these costs are rising rapidly due to increased demand for services, higher costs of doing business due to inflation, and rising labor costs. 

Care at home is still, for the most part, the most affordable option, but home care services are rising dramatically. Adult Day Care Centers, assisted living facilities, memory care facilities, and nursing home costs are also increasing. 

For example, in the Atlanta area, in-home care services, based on a 44-hour week, are already costing, on average, $51,895 a year - over $4361 a month. Imagine having an additional bill for over $4000 or more a month today. However, in 25 years, that same amount of care is expected to run over $101,000 a year - almost $8500 a month - Georgia Long-Term Care Resources | LTC News.

The cost of care services varies nationwide; find the cost of all long-term health care services where you live - Cost of Care Calculator - Choose Your State | LTC News.

Smaller LTC Insurance Plans Can Be Helpful Compared to Nothing

Many people see long-term health care planning today as a cushion, or a supplement, to their retirement income plan.  

The goal is to make a care event manageable for kids, spouses, or other family members that might be involved. There are financial benefits as well. A Long-Term Care Insurance policy can help insulate someone's retirement assets.

Cassandra Watson

Watson, a nationally known planning expert who operates NextGen LTC, and President of Platinum LTC Solutions, a leading national agency featuring Long-Term Care Insurance experts.says that planning for long-term health care is even more important now.

Having a Long-Term Care Insurance policy in a shaky economic environment allows you to wait out potentially adverse market conditions.

Watson says nobody can predict the ups and downs of the markets or when they may need long-term care services in the future. The guaranteed tax-free benefits from an LTC Insurance policy will be there no matter what is happening in the economy. A loss is only a loss if you sell an asset at the wrong time.

Quality Care is Desirable – Family Caregivers Untrained and Unprepared

Protecting your income and assets, lifestyle and legacy are not the only reasons planning for long-term health care is essential. Experts say it is an issue of having quality care options available when you need them. When you own an LTC policy, you won't have to depend on your income and assets or place the burden of caregiving on family members. 

Being a caregiver for a family member is not easy, and there are 53 million unpaid caregivers in the United States alone. Many people are unaware of the number of children who also become caregivers helping out the adult caregivers.

Melinda Kavanaughan is an associate professor of social work at the University of Wisconsin-Milwaukee. She says that as many as 10 million children in the U.S. may provide care at home when professional caregivers are unavailable, or other help is not at home. 

Few people want to place the burden of caregiving on their adult children, much less their grandchildren. However, without planning ahead, that is exactly what happens with many American families. The costs of professional care can be prohibitive, and family caregivers face physical and emotional stress and anxiety.

Having the proper care at the right time will benefit the care recipient and the rest of the family. Poorly trained caregivers or inadequate long-term care facilities can further the decline of the individual's health, which often leads to depression.

Alan Waters of Amada North Atlanta, based in Marietta, Georgia, is reminded of a lady in a skilled facility who was not progressing well. 

"She had become very depressed and was ready to die," Waters said.

In this case, the lady and her husband owned a Long-Term Care Insurance policy. Waters encouraged the husband to activate the policy and get appropriate care in their home.

"After a week or so, the husband agreed as he knew he was going to lose her forever if he didn't get her out of there," Waters said.

The decline in her health halted soon after the wife started receiving personalized quality care in the comfort of her own home. Waters explained that with the quality home care paid for by the Long-Term Care Insurance policy, the husband would have had to close down the family construction business.

The worst-case scenario would've been him having to leave her in the skilled rehab where she likely would have passed away, and he would have lost his wife and their two daughters would have lost their mother.

Alan Waters

The second worst-case scenario is the couple would have had to pay for 100% of the long-term health care costs, adversely impacting lifestyle and legacy. 

Families in Crisis Now – What to Do?

Planning for retirement, including future long-term health care, is vital no matter today's economic situation. But for families in crisis right now, what can they do?

Selling assets from their 401(k) or other accounts will guarantee a loss, even though the "loss" may still be a taxable gain. If someone doesn't own a Long-Term Care Insurance policy, what can they do?

"There is no doubt, inflation fears are rocking Wall Street and should be scaring Main Street. But, like in all dark clouds, there is always some sort of a silver lining," said Mike Banner, host of the TV Show "62 Who Knew" columnist for LTC NEWS and a leading advocate for long-term health care planning.

Banner says with home values soaring to record highs, now is the time for some people to take advantage of those inflated prices.

Now is the perfect time to "lock-in" those values with a reverse mortgage. When you secure a reverse mortgage line of credit, you enter a contract with FHA that guarantees that value for as long as you reside in that home.

Mike Banner

He says that a conventional line of credit that you would get from a bank will undoubtedly decrease your line of credit as soon as the bubble bursts and prices start to drop. Banner said that hundreds of thousands of consumers experienced this during the last recession.

A reverse mortgage takes advantage of the "inflated equity" that will not decrease after securing the mortgage. An individual's monthly principal and interest payments disappear. But you can also use the tax-free income from the reverse mortgage to fund in-home care and eliminate other debt.

Banner says some people use a reverse mortgage to fund their Long-Term Care Insurance policy. If you have a 401(k) that is losing value and most of your assets are within your home, a reverse mortgage could be a solution to protect everything. 

Be careful. Banner recommends using a mortgage broker who understands reverse mortgages. You can ask Banner questions about reverse mortgages and long-term care planning here - Reverse Mortgages | LTC News. 

Quality Caregivers Make All the Difference

Be sure to find quality in-home care providers or facilities when seeking care for a parent or loved one. If they own a Long-Term Care Insurance policy, use the benefits without delay. If not, whether self-funding or using a reverse mortgage, quality caregivers will make all the difference.

LTC NEWS can help you process insurance claims or find quality care options - Filing a Long-Term Care Insurance Claim | LTC News

Avoid the LTC Tax

There is now an additional concern for new taxes to address the pressure on each state's Medicaid budgets. The State of Washington has already implemented the so-called LTC Tax on residents without qualified Long-Term Care Insurance in place. California, Illinois, Michigan, Minnesota, and New York are headed in following Wasgington's lead with an LTC tax of some kind. Other states that are reviewing their options include:  

• Alaska
• Colorado
• Hawaii 
• Illinois 
• Maine
• Massachusetts
• Missouri 
• New Hampshire
• New Mexico
• North Carolina
• North Dakota
• Oregon
• Pennsylvania
• Utah 
• Vermont

If you live in one of those states, you should consider taking proactive action to at least avoid the tax. The tax would be placed on 100% of earned income. The primary benefit of Long-Term Care Insurance is to protect your 401(k) and other assets from rising long-term health care expenses. Avoiding a tax is an added bonus.

Real Threats to Your Future

So, inflation, economic uncertainty, and market declines are real threats to your ability to maintain your desired quality of life when you retire. These threats are not just for today but for decades in the future.

You cannot know when you need long-term health care and the economic climate at that time. You do know that you will not want to place the burden of caregiving on your family. You will wish to have quality care options, including in-home care. Plus, you will want to maintain your lifestyle and legacy.

Long-Term Care Insurance is a vital part of retirement planning. Delaying the decision to obtain coverage will only make it more expensive or unavailable in the future. LTC Insurance is medically underwritten and priced, in part, by your age, health, and family history. 

Use the uncertainty of today to add guarantees to your life. Long-Term Care Insurance will provide those guarantees. Your tax-free benefits increase over time, keeping up with higher care costs in the future. Many states offer partnership policies with dollar-for-dollar asset protection.

Self-funding future long-term health care or depending on loved ones to be caregivers are not ideal planning alternatives. Most people obtain Long-Term Care Insurance in their 50s. 

There are many truths you may not want to ignore. Aging happens. The economy changes. Your health will decline. Longevity has consequences. An LTC Insurance policy can address these concerns and do so very affordably; all you have to do is plan now.